C-139/77

scope of the agricultural provisions of Treaty, it is for the competent auth­

the Treaty to be defined, in other orities where necessary to define the

respects, particularly as regards the type scope of such rules in relation to

of undertakings subject to the provisions persons and in relation to subject­

in question, the concept of agriculture is matter.

not precisely defined in the Treaty.

Journal, English Special Edition 1969 (II), p. 527),

1 — Language of the Case: German.

JUDGMENT OF 13. 6. 1971 — CASE 139/77

THE COURT

composed of: H. Kutscher, President, M. Sørensen (President of Chamber), A. M. Donner, P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe and A. Touffait, Judges,

Advocate General: G. Reischl Registrar: A. Van Houtte

was made for contributions by the

I — Facts and procedure EAGGF (European Agricultural Guidance and Guarantee Fund). 1. When the Government of the

Federal Republic of Germany took the 3. Article 1 (1) to (3) of Regulation decision on 24 October 1969 to revalue No 2464/69 provides as follows: the German mark as from 27 October "1. Aid granted to German agricultural 1969 by 8.5 % in relation to its official producers under the conditions set

parity, the Federal Republic and the below out shall be considered to be Community faced the problem of compatible with the Common compensation for the losses of income Market. resulting for German agriculture from the linking of European agricultural 2. Such aid may be granted up to the

prices to a common unit of account. amount of DM 1 700 million for each budgetary year from 1970 to

1973 inclusive. The Community 2. The German authorities and the

on the basis of the price or the in the main action engages in producing

quantity of the product. feeding-stuffs and in fattening calves on substitute milk-based fodder which it Aid may be granted partly in the produces itself. For this purpose it buys form of an advance to the agri­

calves of about one week old and sells cultural producer when he sells his them for slaughter fattening them after products, subject to a maximum of for four months. Not having any agri­

3 % of the selling price, to be paid cultural land for the purpose of either by the buyer or by an agency its be fattening calves, the company to appointed by the competent constitutes not an agricultural under­ authorities."

national taking but rather an industrial under­

taking within the meaning of German 4. The Council decision of 21 January tax law. 1974 (which was notified to the Federal Republic of Germany on 24 January 7. In 1974 the turnover of the plaintiff 1974, but not published) prolongs and sales of calves which it had company on amends the measure authorized by fattened was DM 21 394 474.21. In its Article 1 (3) of Regulation (EEC) No for it tax return that year, claimed aid 2464/69 inasmuch as the Federal of DM 641 834.24 (that is to say 3 % of Republic was "provisionally authorized its Article 4 of the total turnover) under to grant aid to agricultural producers in Aufwertungsausgleichgesetz. By a

tungsausgleichgesetz (a law on gericht (Finance Court) Münster the

compensation for the effects of reva­ proceedings which constitute the main

luation), Article 4 of which authorized action.

agricultural and forestry undertakings, within the meaning of Article 24 (2) of 9. By an order of 26 September 1977, the Umsatzsteuergesetz (Law on the Finanzgericht Münster stayed the

turnover tax) in conjunction with proceedings and referred the following Article 51 the Bewertungsgesetz questions to the Court of Justice of the of

(Law on to reduce the European Communities for a preli­

2. If the first question is answered in question, the plaintiff in the main action the affirmative: claims that in practice only persons

Are Article 39 producing not more than 50 fattened and the second

Article 40 calves per hectare per annum qualify as subparagraph of (3) of

EEC Article agricultural fatteners of calves for the the Treaty and 1 of

Regulation No 2464/69 purposes of that law. (EEC) of

the Council or any other provisions However, on the structural and of Community law to be interpreted economic plane there is no difference as meaning that they forbid the between industrial fattening of calves, on Federal Republic of Germany, as a

cultural producers — in this case, sheds at a time. Thus the agricultural "agricultural"

industrial livestock breeders and area of the fattener is keepers within the meaning of irrelevent to the fattening of calves and German tax law — from the grant can be used only for other activities (for of aid? example, the cultivation of cereals, vines

and so on). 3. Is this prohibition directly applicable in the national sphere so The purchase prices of young calves and that an individual trader is entitled

to upon it before the national the selling prices of fattened calves rely courts?" depend on market conditions, which in their turn are influenced decisively by the common organization of the market 10. Upon hearing the report of the in beef and veal set up by Regulation Judge-Rapporteur and the views of the (EEC) No 805/68 of the Council of 27 Advocate General, the Court decided to June 1968 (Official Journal, English open the oral procedure without any Special Edition 1968 (I), p. 176). In preparatory inquiry. fact, the aforementioned prices are

prices dependent on the agricultural price

policy. II —

provisions of the German tax law in gericht Münster

DENKAVIT v FINANZAMT WARENDORF

The first question "agricultural producer", which must be defined in accordance with Community The plaintiff in the main action

"agri­ law, according to any other legal maintains that the expression

Regu­ conceptions or traditions. This is all the in producers"

cultural appearing lation No more so as, under Article 1 (2) of Regu­ (EEC) 2464/69, binding a lation No 2464/69, the Community and directly applicable regulation which allows measures to be taken within the contributed to the financing of the aid. On the contrary, in Regulation No framework of the common agricultural 2464/69, the Council intended to policy (third paragraph of Article 3), establish and did establish rules resulting designates a concept the content of in compensation for revaluation in which must be defined by Community respect of all products coming under the law. common agricultural policy — and thus On the basis of an analysis of the also under the agricultural price policy wording of Articles 37 (4), 40, 42, 43 — for which income was lost as a result and 45 of the Treaty, the plaintiff of the revaluation of the German mark

accordance with Article 38 (3) of the national measure which departs from EEC Treaty those products are listed in the content of the authorization given

Annex II to the Treaty or have been in Regulation (EEC) No 2464/69. subsequently added to that list. Even if the intention at the time of the

Thus the concept ot an agricuttural preparatory discussions was to exclude

producer" within the meaning of industrial livestock keeping and

Community law relates to the production breeding, within the meaning of

of a specific product, and not to the way German tax law, from the rules on

producers of agricultural products Advocate General in Case 50/76 within the meaning of Article 38 (2) and Amsterdam Bulb NV [1977] ECR 137) (3) of the EEC Treaty in conjunction binds not only the Community with the list in Annex II to the EEC legislature but also the Member States Treaty, regardless of whether and by when they exercise the powers

what criteria national law classifies such conferred on them within the 'agricultural' producers as or framework of the common agricultural 'industrial'."

policy.

In the present case, Regulation (EEC) The second and third questions No 2464/69 is enacted as a common agri­ The plaintiff in the main action cultural policy measure, and

considers that these questions are in and consequently applying if the first is relevant even question not implementing it the Federal Republic of answered in the affirmative. In that had Germany to observe the Federal Republic Germany event, the of Community law prohibition on discrim­ would have duty within a the ination laid down in Article 40 (3) of framework of Community rules to use the Treaty. the authorization in Regulation No The plaintiff in the main action 2464/69 in such a way that the plaintiff emphasizes the particularly marked as an industrial fattener of animals effect of the prohibition on discrim­ would benefit from compensation for ination in the case of unequal treatment revaluation.

of the same product. That prohibition

that regulation as agricultural L 321, p. 1), an authorization

in Regu­ producers. Therefore the plaintiff also corresponding to that granted

enjoys the protection of the prohibition lation (EEC) No 2464/69, and in on discrimination laid down in Article making use of that authorization they discrim­ 40 (3) of the EEC Treaty. observed the prohibition on

ination laid down for Community Starting from that argument, the products. plaintiff in the main action submits in particular that the principle of non- Incidentally, the plaintiff in the main

discrimination laid down in Article 40 action challenges the decision of the

(3) applies to producers within a single Bundesverfassungsgericht (Federal Member State and (the argument Constitutional Court) of 8 December defended by the Commission and the 1970 (which is mentioned in the

breeders and keepers, the Federal Article 40 (3) to the effect that any Republic of Germany infringed the common price policy shall be based on

prohibition on discrimination laid down common criteria and uniform methods

in Article 40 (3) of the Treaty, and that of calculation.

that prohibition is directly applicable in the national sphere. Interpretation in the light of Article 1 of Regulation (EEC) No 2464/69 Interpretation according to the aims The plaintiff in the main action points

and functioning of the organization of out that it has already stated its position

the market in beef and veal on the concept of "agricultural

market in beef and veal (Regulation extent to which the Federal Republic of

(EEC) No 805/68) form pan of such Germany makes use of those powers, it "other provisions". must observe the Community law laid The down in the regulation. aims and functioning of the organi­

zation are jeopardized in particular by In support of this submission the

national measures of such a nature as to plaintiff in the main action relies infer exert an influence on market conditions. alia upon the following arguments: This inter Regu­ is the case alia where —

According to its own wording, Member States take action, through lation (EEC) No 2464/69 arose

internal legal provisions, affecting the from the fixing of prices in units of machinery of price formation in the account within the framework of the

had to be applied so as to such a marked Community and products, have Community law character that the no effect on competition, and

had to binding force of the regulation in to relate all products subject particular Article 1, is beyond question. to an organization of the market of

After Federal Republic had which the prices were directly or the made

it indirectly influenced. use of the authorization granted to

under Article 1 (1) of Regulation (EEC) — Article 1 (1) of Regulation (EEC) No 2464/69, it was bound not to depart No 2464/69 makes the authori­ from the wording, the aim and the zation subjea to the "conditions set content of that regulation. The Federal out below". This means that the Republic had to confine itself strictly to Federal Republic of Germany is not the framework which the regulation free in the way it distributes established, because as from 1 January compensation for revaluation, but 1970 it no longer had any power to must act in accordance with the adopt autonomous rules in the field of conditions laid down in the regu­

common organizations of agricultural lation. One of those conditions is set markets. On this point the plaintiff in out in Article 1 (3) of the regulation, the main action refers to the judgment according to which: Court Justice 25 1977 of the of of May "Aid may be granted partly in the in Case 77/76 Cucchi [1977] ECR 987. form of an advance to the agri­

action proposes the following answer to binding — regulation was chosen solely questions Nos 2 and 3 of the Finanz­ because Regulation (EEC) No 2464/69 gericht Münster: contains certain binding provisions in addition to the — optional — pan ''Article 39 and the second subpara­

making recommendations. As appears graph of Article 40 (3) of the EEC from the preamble, the binding Treaty, the provisions concerning the provision is that grant of must be aid aims and functioning of Regulation restricted to a certain period of time. (EEC) No 805/68 and Article 1 of The German legislature was not bound Regulation No 2464/69 are to be either to make use at all of the any interpreted as meaning that, in the field power conferred or to it in its use all of stockfarming and by reference to possible applications. Within the limits products, each animal receives an of the power conferred, the German Aufwertungs­ abatement under the legislature was entitled to differentiate ausgleichgesetz, so that, in the event of both as regards subject-matter and as

the direct by differen­ grant of aid way of regards time, as long as such

compensation for revaluation in respect tiations were not arbitrary.

of agricultural products subject to an The discriminatory restriction by the organization of the market, they forbid German legislature is based on social the Federal Republic of Germany to and structural policy considerations exclude certain classes of agricultural intended to protect agricultural

producers from the grant of such aid, have land. producers who agricultural regardless of whether the producers That differentiation is not specifically qualify as industrial or as agricultural German; on the contrary, the other livestock breeders and keepers under Member States of the Community also

B — Observations submitted by the Preliminary observations defendant in the main action The Commission notes that the

The defendant in the main action reference for a preliminary ruling maintains that on the basis of Regu­ expressly refers to Regulation (EEC) lation No No 2464/69. However, since the auth­ (EEC) 2464/69, the

legislature had legislative power to orization granted by that regulation

restrict the aid provided for in that regu­ applied only up to and including 1973, lation in "agricultural and since the dispute in the main action respect of producers"

concerns the abatement of value-added agri­ to certain producers of tax in 1974, it would be more correct to cultural products.

say that this case does not concern the

and

and 40 (3) of the Treaty, to (EEC) No 2464/69 shows that the "producers"

of "agricultural products", Community considered that the concept in itself allows of the view that the rules of an "agricultural producer"

had to be on aid should not be applied to given a strict interpretation, analogous

industrial producers. However, it must to that which it has under German tax

be admitted that the wording alone does law. The Federal Republic of Germany not allow such a conclusion to be drawn made it clear from the outset that it with the necessary degree of certainty. intended the aid to be restricted to agri­

compensation for net losses of income The second question suffered, account was also taken of the

positive effects of revaluation, including According to the Commission, this

the reduction in the price of fodder, question is asked only in the event of

fertilizer and other imported farming the first question's being answered in stock. the affirmative. Even in that event, neither Article 1 of Regulation (EEC) Furthermore, in the Commission's No 2464/69 nor Articles 39 and 40 (3) submission, the compensation at issue of the Treaty forbid the Federal has a specific social connotation: it was Republic ofGermany to exclude specific necessary to prevent a sudden decrease classes of agriculural producers from of about 10 % (the rate of the reva­

the grant of aid. luation was 9.29 %) in the income of a

class of society consisting largely of On the one hand, the regulation merely small-scale or medium-scale farmers confers a power and in no way provides

Community law. develop or reduce that additional source of income according to market and On the other hand, if Article 40 (3) of price conditions, much more easily than the Treaty imposed an obligation on the a farmer dependent on the soil and the Federal Republic to extend the grant of

industrial weather. Thus the plaintiff can organize aid to livestock keepers, an

analogous obligation was incumbent its economic activities more flexibly, and is therefore less affected by an upon the Community institutions, and

event, such as revaluation of a currency, therefore it would be more correct to

Council decision which influences the prices of agri­

consider whether the cultural products. to restrict the scope of the power to "agricultural" grant aid solely to It may be that not all industrial under­

the concept based on Article 3 of the together with the reduction in the price

Grundgesetz (Basic of imported fodder, showed that in Law) (and thus to

repudiate the decision of the Bundesver­ general they had no need of aid. If the

fassungsgericht of 8 December 1970 — aid had been extended to that category BVerfGE 29, 337 of producers as well, industrial relating to p. the —

Aufwertungsausgleichgesetz). In the producers in other Member States, not

Commission's the pro­ benefiting from a reduction in prices submission, hibition on discrimination laid down in due to revaluation, might even have Article seen that measure as discrimination. 40 (3) of the Treaty contains

Council took account of the fact that negative because, as the Court of Justice industrial undertakings were in an has already held in Joined Cases 117/76 advantageous situation for still other and 16/77 Ruckdeschel [1977] ECR reasons than the reduced price of 1753 (judgment of 19 October 1977),

JUDGMENT OF 13. 6. 1978 — CASE 139/77

the incompatibility of Community rules decision of the Council of 21 on agriculture with the principle of January 1974 forbade the Federal

equality does not necessarily enable the Republic of Germany to exclude

person concerned to enforce against the industrial livestock breeders or

national authorities a direct right to the keepers from the aid intended to

producers'

in Regulation before the national courts."

appearing (EEC) No 2464/69 of the Council of 9 December 1969 does not

include industrial livestock breeders III — Oral procedure

or keepers. At the hearing on 13 April 1978 the

Should the Court of Justice find it plaintiff in the main action, represented

the concept of an as well as of and the

second subparagraph of Article 40 (3) of the Treay and of certain provisions

of Regulation No 2464/69 of the Council of 9 December 1969 on measures

to be taken in agriculture as a result of the revaluation of the German mark (Official Journal, English Special Edition 1969 (II), p. 527).

2 It emerges from the case file that the main action originates in the refusal by the Finanzamt Warendorf, the defendant in the main action, to allow the

application for aid under the German law adopted pursuant to the said regu-

origin and content of the Community rules and, to the extent to which it appears from the case file, of the national legislation at issue.

4 By a decision of 24 October 1969 the Government of the Federal Republic of Germany revalued the German mark as from 27 October 1969 by 8.5 %

in relation to its official parity.

The German Government and the Community then faced the problem of

compensation for the losses of income resulting for German agriculture —

in particular for German producers of agricultural products for which there was intervention system, such as cereals an and milk products — from the

In the second and third recitals in the preamble to the regulation it is stated

that, "on the basis of current data on the value of the unit of account and

on the prices and quantities of the agricultural products in question, such

loss of income can be estimated at DM 1 700 million a year", and that

"provision should be made for the Federal Republic of Germany to grant aid by way of compensation for such losses in the form of direct aid to

agricultural producers".

3. Aid may be granted in the form of direct aids to agricultural producers in so far as they are not calculated on the basis of the price or the

quantity of the product.

Aid may be granted partly in the form of an advance to the agricultural

producer when he sells his products, subject to a maximum of 3 % of

the selling price, to be paid either by the buyer or by an agency to be appointed by the competent national authorities.

4. The Federal Republic of Germany shall take appropriate structural or social measures to offset the decreasing financial support from the Community.

6 On 23 December 1969 the German legislature, basing itself on Regulation No 2464/69, enacted the Aufwertungsausgleichgesetz (a law on

compensation for the effects of revaluation, Article 4 of which authorized

agricultural and forestry undertakings, within the meaning of Article 24 (2) of the Umsatzsteuergesetz (Law on turnover tax), to reduce the amount

assessable to turnover tax by 3 %.

DENKAVIT v FINANZAMT WARENDORF

Under Article 24 (2) of the Umsatzsteuergesetz, establishments breeding and keeping livestock are deemed to be agricultural and forestry under­

The first "agricultural producers"

7 question asks whether the expression

appearing in Article 1 (1) and (3) of Regulation No 2464/69 includes industrial livestock breeders and keepers within the meaning of German tax law.

8 The second question asks whether Article 39 and the second subparagraph

of Article 40 (3) of the Treaty, Article 1 of Regulation No 2464/69 or any other provisions of Community law forbid the Federal Republic of

Germany, as a State to which the said regulation was addressed, to exclude specific classes of agricultural producers — in this case, industrial livestock breeders and keepers within the meaning of German tax law — from the

It has been submitted that this concept includes all producers of agricultural

products within the meaning of Article 38 of the Treaty and of Annex II thereto, which do not make any distinction between breeders running an

agricultural undertaking and industrial breeders.

11 Although in certain respects Article 38 and the related provisions allow the

scope of the agricultural provisions of the Treaty to be defined, in other

respects, particularly as regards the type of undertakings subject to the

12 The purpose of the regulation at issue is to provide compensation for losses caused by the reduction in prices for agricultural products, and it makes no distinction between methods of production, even if the losses weigh more

heavily on certain classes of producers.

Since neither the context nor the objectives of the regulation demand a

restrictive interpretation, it is not out of the question that the relatively broad expression "agricultural producers", which is used in the wording of the regulation, may include production of agricultural products by any method whatever.

13 It should be pointed out that the third recital in the preamble to Regulation No 2464/69 makes provision "for the Federal Republic of Germany to for" grant aid by way of compensation the losses in question "in the form of direct aid to agricultural producers".

Under Article 1 (1) of the regulation, aid granted to German agricultural

referred to in the regulation.

15 In providing in paragraph 1 that the objectives of the common agricultural

policy shall be inter alia to ensure a fair standard of living for the agri­

cultural community, in particular by increasing the individual earnings of

persons engaged in agriculture, Article 39 does not exclude the possibility of

DENKAVIT v FINANZAMT WARENDORF

natural disparities between the various agricultural regions".

Although Article 40 (3) of the Treaty prohibits any discrimination between producers within the Community, and even within a single country of the Community, different treatment could be regarded as constituting prohibited discrimination only if it appears to be arbitrary.

16 Accordingly, it must be considered whether the differentiation, for the

purposes of German tax law, made by the Aufwertungsausgleichgesetz between agricultural breeders and keepers on the one hand and industrial breeders and keepers on the other, is discriminatory within the meaning of Article 40 (3) of the Treaty.

17 It appears from the case file inter alia that, because they use fodder which is

mostly their own farm produce, agricultural livestock breeders and keepers within the meaning of German tax law are subject in particular to the risks

keepers and industrial livestock breeders and keepers, which German tax

law makes by laying down a ratio between the head of livestock and the

utilized agricultural area and which the Government of the Federal Republic of Germany adopted as an objective, albeit unmodulated, criterion as regards the granting of the aid which it is empowered to grant by the provisions of Regulation No 2464/69, cannot be classified as discriminatory.

JUDGMENT OF 13. 6. 1978 — CASE 139/77

18 It follows from the foregoing considerations that the answer to the national courts should be that neither the provisions of the Treaty nor Article 1 of

Regulation No 2464/69 nor the provisions of the Council decision of 21

As these proceedings are, in so far as the parties to the main action are

concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT,

in answer to the questions submitted to it by the Finanzgericht Münster by an order of 26 September 1977, hereby rules:

Neither the provisions of the EEC Treaty nor Article 1 of Regulation No 2464/69 of the Council nor the provisions of the Council decision of 21 January 1974 forbade the Federal Republic of Germany to exclude industrial livestock breeders or keepers from the aid referred to in the